I was recently at the National Center for Database Marketing Conference and the words hosted analytics, outsourced analytics and managed analytics were used very interchangeably. Many of the attendees I talked to seem confused by the various terms, their benefits and why you might consider one over the other.

I talked to many of the vendors and called a few contacts to see how they might differentiate the terms to see if the differentiation lined up with my view of the analytics space. As usual, there is not true consensus. Reality, marketing and hype have been mixed together to suit individual needs. However, I think you can always at least put a stake in the ground to give definition and substance to ambiguity.

Outsourced Analytics

Outsourced analytics feels a lot like today’s service bureaus. These situations typically arise from the fact that an organization has outsourced their marketing infrastructure such as the database, campaign management and possibly reporting.

In this case, the client may turn to that organization to supply a certain amount of reporting, analysis and possibly predictive modeling. The large service bureaus actively play in this space like Epsilon, Experian or Merkle. This relationship can be extremely conducive and cost effective since the supplier presumably knows your data very well, knows your business and, if they are helping run your campaigns, may have a decent glimpse inside your marketing strategy.

The complaint from clients in this environment can be the black box nature of the service and a lack of collaboration. Since the organization already houses the data, the details of the assignments are hidden and sometimes not easy to apply to other parts of the business such as website personalization or real-time call center offers.

Managed Analytics

Managed analytics adds a degree of consulting to outsourced analytics. Though the actual execution of the model, reports and analysis may look very much like outsourced analytics, it is really the nature of the relationship that is very different. In a managed analytics situation, clients are really asking for a strategic partner to be their analytics group.

In this situation, the supplier is intimately involved with strategic planning, detailed understanding of business performance and recommending courses of action based on what the data is telling them. The managed analytics supplier provides detailed analysis, interpretation and identifies cause-and-effect relationships.

The managed analytics relationship works well for organizations that would have a difficult time building an analytics group internally or do not want to wait for the development of a group. Clients who are hungry for more detailed analysis and interpretation reap benefits of a managed analytics organization by decreasing learning curves, not having to manage staff and producing results quickly.

Though vendors that supply outsourced analytics also stray into managed analytics, managed analytics organizations typically reside in specialty niche firms that deliver high-touch consulting. The main complaint about managed analytics is the expense of such a relationship.

Hosted Analytics

Hosted analytics is a type of middle ground between the managed and outsourced solutions. Hosted analytics implies that the analytics and reporting infrastructure does not reside in your data center, but you have access to the applications and data over the Web.

Though many service bureaus and agencies will provide state-of-the-art reporting tools like SAP BusinessObjects, IBM/Cognos or Oracle/Hyperion, to their clients, newer, more savvy hosted analytics firms provide deeper analysis and more sophisticated applications. For instance, Quantivo supplies market basket analysis, affinity analysis and product purchase patterns for retailers with their newly launched application. They have a high speed database combined with easy-to-use tools that allow clients to sift through the data in a hybrid OLAP/predictive model mode.

Complaints in this type of environment are the lack of true consulting, handholding and training to actually deliver the ROI on the analytics since you are pretty much left to your own devices.

Summary

As corporations feel comfortable with their data warehouse and business intelligence environments, the rush to deeper analytics is on. With depressed budgets, outsourcing and software as a service will likely look more appealing, but there are definitely a variety of choices even within this niche supplier environment. I recommend balancing the following:

• Your political, technical and strategic concerns with shipping your customer information outside your walls. Outsourcing is typically a fast setup and then a slow environment to make changes and keep up with changing competitive environments.
  
  
• Your internal sophistication with predictive modeling and customer analytics. How much handholding will you need in the short and long term?
  
  
• What type of resources do you have internally that can turn models into strategies and tactics?

Answering these questions will ultimately lead you to the right fit to drive ROI on your business intelligence and data analysis efforts.

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